When John and Cyndy Burd were ready to retire, they wanted to feel secure knowing that their adult disabled son, Joshua, would have the financial support he needed to be taken care of when they died.
“Josh is 37, has always lived with us, and we are fully responsible for his 24-hour care. He has frequent seizures and requires restraint and numerous safety measures,” Cyndy Burd explains. “Josh is medically fragile, a very quiet and shy man but very much a blessing in our lives.”
With the intention to provide for Joshua, John and Cyndy Burd each named him as their cobeneficiary – the person who will receive a monthly benefit for the rest of his life upon the death of the retiree. Unfortunately, they were not aware that naming Joshua as a cobeneficiary would jeopardize his eligibility for public assistance through Medicaid and Supplemental Security Income. Joshua’s PERA benefit would exceed the income limits for those programs and, as a result, terminate the very important support the existing programs provide, including medical care and community placement. With his severe disability and need for 24-hour care, the PERA benefit alone would not be nearly enough to cover his needs.
The Burds discovered that PERA law did not allow the removal of Joshua as a cobeneficiary. There was no way to fix the mistake they made, so they approached their attorney, Laura Mathews, who took on the case, charging no fees. The family and Ms. Mathews contacted PERA to discuss potential alternatives.
State Senator Irene Aguilar (D-Denver) was a champion of this cause. The Burds are her constituents. She enlisted PERA’s help, and PERA worked with Senator Aguilar to find a solution to protect the retirement savings benefits earned by PERA retirees. PERA’s law only allowed a “person” to be named as a cobeneficiary. To protect Joshua’s eligibility, the Burds could have chosen an Option 1 benefit (single benefit for the retiree’s life) or they could have named another person as a cobeneficiary. However, that route would have left Joshua without supplemental funds to cover expenses not covered by the public benefits. Those expenses include additional therapy, clothing, companion care, educational opportunities and in Joshua’s case, art supplies.
“Under existing State and Federal law, parents who have children with profound disabilities have the option to create a Third Party Supplemental Needs Trust and designate these trusts as the beneficiary for IRA Benefits, Retirement and Pension Plans,” explains Laura Mathews. “These trusts if drafted and administered correctly, are an exempt asset and do not count as a resource for the disabled child.”
Senate Bill 15-097 was drafted to allow the Burds to change their cobeneficiary designation from Joshua to a Supplemental Needs Trust for his benefit. Once the cobeneficiary monthly benefit is deposited in the Trust, a trustee for the Trust will manage the funds and pay for Joshua’s supplemental needs without jeopardizing his eligibility for public benefits.
“The purpose of SB 97 is to preserve existing public benefits being received by a child using a mechanism already allowed under State and Federal law to protect public benefits and to fix an unintended consequence of the PERA law,” said Laura Mathews. The bill provides that retirees can name a Supplemental Needs Trust as a cobeneficiary and that a Supplemental Needs Trust will step in to receive benefits when a disabled child is a survivor of an active member. It also allows retirees, such as the Burds, to change their previously named cobeneficiary from a disabled child to a Supplemental Needs Trust to avoid losing public assistance.
Under Sen. Aguilar’s and State Representative Lois Landgraf (R-Fountain) bipartisan leadership, SB 15-097 passed both chambers of the General Assembly. It has been signed by the Governor.
For more information on retirement benefit option selection, please see the Your PERA Benefits publication or call PERA’s Customer Service Center.
AlternativesA broad category of investments that don’t fit into traditional categories like stocks and bonds.
